Need-based student aid in jeopardy

Kathleen Pender, business columnist for the San Francisco Chronicle poses for a portrait on Tuesday Sept. 30, 2008 in San Francisco Calf.

Kathleen Pender, business columnist for the San Francisco Chronicle poses for a portrait on Tuesday Sept. 30, 2008 in San Francisco Calf.

Photo: Mike Kepka, The Chronicle

Photo: Mike Kepka, The Chronicle

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Kathleen Pender, business columnist for the San Francisco Chronicle poses for a portrait on Tuesday Sept. 30, 2008 in San Francisco Calf.

Kathleen Pender, business columnist for the San Francisco Chronicle poses for a portrait on Tuesday Sept. 30, 2008 in San Francisco Calf.

Photo: Mike Kepka, The Chronicle

Need-based student aid in jeopardy

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Gov. Arnold Schwarzenegger's draconian plan to phase out the state-funded Cal Grant program for lower-income college students starting this fall has students, schools and financial aid advocates in shock.

"This is a very theatrical and distressing threat," says Lauren Asher, acting president of the Institute for College Access & Success.

Cal Grants are need-based financial aid awards that go to undergraduate students attending public or private colleges in California who meet certain income and grade-point-average requirements. The grants, which go only to state residents, are fairly generous and do not have to be repaid.

They provide up to the full fees at public universities - $7,788 at University of California campuses and $3,354 at California State University schools. Low-income students attending community colleges, who typically pay no fees, can get up to $1,551 per year in cash for transportation, books and living expenses. Those attending private colleges in California can get up to $9,708 in tuition payments.

Most students who qualify have already received their Cal Grant offers for the 2009-10 school year.

The governor's proposal, released Tuesday, would do two things. First, it would eliminate all new Cal Grants. About 118,000 students who were offered Cal Grants for the first time this fall would have their offers rescinded, according to the California Student Aid Commission, which administers Cal Grants.

Students who got them in the past would continue getting them if they still qualify. But under the second part of the proposal, Cal Grant awards would no longer go up to match fee increases at the state's public universities. If the plan passes, about 82,000 students returning to UC and CSU campuses in the fall would have their grants rolled back to last year's level - $7,126 at UC and $3,048 at CSU campuses.

The proposed changes would save the state more than $200 million in fiscal 2009-10 and more than $450 million the following year.

Although the governor has attempted to trim the Cal Grant program in the past, this is the first time he has proposed dismantling it.

"We are trying to process the magnitude" of the proposal, says Allison Jones, assistant vice chancellor for academic affairs for the CSU system. "It defies comprehension how we can (implement) this reduction in a two-month period of time for a class that has already been admitted."

Alternate plans

Schools are scrambling to formulate plans in case the Legislature goes along with the governor's proposal, or some version of it.

"We are coming up with various different scenarios as to how to react to this huge loss," says Nancy Coolidge, the UC system's coordinator of student financial support.

Rather than have new students absorb the entire loss, the UC system could reallocate its own financial aid pool. For example, middle-income students who had been receiving grants from the pool (which is funded in part with a portion of fees paid by students) might have some of their grant replaced with loans so that more grants could go to low-income students who lost Cal Grants.

Another option could be increasing fees so that more money goes into the pool. Coolidge stressed that UC has made no decisions. "Many ideas will go forward to the regents," she says.

Students are also fretting.

Thomas Lewis, an aspiring medical student attending College of San Mateo, was awarded a first-time Cal Grant of $1,551 for the coming school year and $7,788 for 2010-11, when he plans to attend UC Berkeley. But if the governor's proposal is approved, he would lose both grants and might have to transfer to a cheaper university. "I would have to look at all my options and then choose something I could afford," he says.

Although all states are facing budget woes, most are not planning to cut need-based aid.

"This is not happening everywhere," says Tom Mortenson, senior scholar at the Pell Institute for the Study of Opportunity in Higher Education. "Almost all other states protect need-based grant programs and expand them during recessions." To compensate, "they cut school budgets with the expectation they can raise tuition. This is why we were all so shocked that the governor was going to cut this first. Maybe he is making a political statement. He's going to galvanize a lot of opposition."

Schwarzenegger is also proposing cuts to the UC and CSU budgets and eliminating funding for UC Hastings College of the Law in San Francisco.

The Cal Grant program, started in 1955, has many supporters who will fight hard against the governor's proposal. But the program also helps show how the state got into the budget mess it's in.

Before 2001, the state allocated funds each year and the number of grants depending on funding.

Entitlement program

In 2000, when the state was running a surplus, the state decided to convert it into an entitlement program. Students were guaranteed a Cal Grant if they graduated from a California high school with a minimum GPA and met the income requirement. The budget increased to cover the number of grants awarded.

Compared with other states, California is relatively generous with need-based aid.

Mortenson measured how much each state spent on need-based aid as a percentage of federal need-based aid. California's ratio was 51.4 percent, 10th-highest in the nation and up from 35 percent 10 years ago.

"California has made a strong commitment to need-based grants," Mortenson says.